Employment law update – Resignation with immediate effect and the legal consequences thereof

September 1st, 2018

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Moksha Naidoo BA (Wits) LLB (UKZN) is an advocate at the Johannesburg Bar.

It is trite law that an employee who resigns on notice may be disciplined and even dismissed during the course of serving their notice period. Under these circumstances, the employee’s dismissal interrupts their resignation and it is recorded that the employee was dismissed as opposed to having resigned.

What, however, is the legal position when an employee resigns with immediate effect?

Does the employer automatically lose its right to discipline the employee or is it within the employer’s rights to hold the employee to the contractual or statutory notice period and during such time, discipline and dismiss the employee before the notice period expires?

In Mtati v KPMG Services (Pty) Ltd (2017) 38 ILJ 1362 (LC), the employer informed the employee that they were investigating certain acts of alleged misconduct against her, whereafter she immediately tendered her resignation on four weeks’ notice. During her notice period the employer served the employee a notice to attend a disciplinary hearing, which was scheduled before her notice period expired. The employee, on receipt of the notice, handed in a second resignation letter with immediate effect. On the first day of the inquiry the employee attended and argued before the chairperson that she was no longer an employee and thus the chairperson lacked jurisdiction to continue with the process. The chairperson rejected the argument prompting the employee to leave the inquiry and launch an urgent application at the Labour Court (LC) to interdict the disciplinary hearing from continuing.

The employee’s argument at court was that once she resigned with immediate effect, she was no longer an employee and, her erstwhile employer did not have the jurisdiction to discipline her.

In its judgment and in summarising the legal position in respect of an employee resigning with immediate effect, the court held:

‘In summary, the principle to discern from the above is that an employer has no authority or the power to discipline an employee who resigns from his or her employment once the resignation takes effect. In other words, where the resignation is with immediate effect, the employer loses the right to discipline the employee, also with immediate effect.’

In keeping with this legal position, the court went further to find:

‘In my view, the second letter of resignation of the applicant changed the status of the employee from that of being an employee, in the ordinary sense of the word, to that of being the erstwhile employee of the respondent. This means that the termination of the employment contract with immediate effect took away the right of the respondent to proceed with the disciplinary hearing against her.’

The court ruled that the employer did not have jurisdiction to discipline the employee after she tendered her second resignation with immediate effect.

In Coetzee v Zeitz Mocaa Foundation Trust and Another (LC) (unreported case no C517/2018, 14-6-2018) (Rabkin-Naicker J) the LC was faced with a similar situation. The employee received an invitation to make written submissions why he should not be placed on precautionary suspension and the next day, verbally resigned. It was agreed by both parties that a press statement be released announcing that an inquiry into the professional conduct of the employee had been initiated and that the employee had since tendered his resignation.

A dispute, thereafter, ensued between the parties. The employee argued he had resigned with immediate effect and, as such, the employer could not pursue disciplinary action against him, whereas the employer argued that it had not accepted the employee’s resignation with immediate effect, nor had it waived its contractual right to the required notice period. On this basis, the employer argued that it was holding the employee to serve out his contractual notice period of four weeks, during which time, it would be within its rights to discipline the employee.

The employee approached the court on an urgent basis seeking relief, among which an interdict preventing the employer from continuing with the disciplinary action against him.

The court firstly set out the applicable legal principles, that being –

a resignation is a unilateral act;

when an employee resigns on notice, the employment relationship ends at the expiry of the notice period;

if an employee resigns without serving the required notice period, the employee breaches the employment contract;

an employer, in this scenario, may hold the employer to the contract and seek an order of specific performance, alternatively accept the employee’s repudiation, cancel the contract and seek damages against the employee; or

further alternatively, the parties could agree to the termination and waive any right they might have had in terms of the contract.

Having set out the above the court continued by stating:

‘The above statement is a correct reflection of the law. Reference was made to the case of Mtati v KPMG Services (Pty) Ltd in submission before me. This judgment has recently been overturned on appeal on the basis, (as far as can be gleaned from the LAC ex tempore order) that the dispute before the Labour Court was moot. In as far as that judgment was in conflict with the summary of the law above, it is no longer persuasive. There is no need for the Court to deal with the facts and law applied in that case.’

Applying the law to the merits, the court identified the dispute as factual in nature. The employee argued he had resigned with immediate effect, while the employer argued it had not accepted the employee’s resignation with immediate effect and held the employee to the notice period. Relying on the ‘Plascon Evens’ test when dealing with factual disputes in motion proceedings, the court found the employee had not made out a case for the order sought and dismissed the application with no order as to costs.

In my view what distinguishes the decision in Mtati from Coetzee, is the legal consequence, which flow from an employee resigning with immediate effect without serving their notice period.

The court in Mtati held that under such circumstances the resignation itself bring to an automatic end the employment relationship, whereas in Coetzee, the court found that if the employer does not accept the immediate resignation and holds the employee to the notice period; the employment relationship only ends at the expiry of the notice period.